Introduction to Management Accounting – Chapter 1

These vocabulary flashcards cover the fundamental terms and distinctions introduced in Chapter 1: Introduction to Management Accounting, including definitions, scope, roles, and contrasts with financial accounting.

Accounting

A process of identifying, measuring, and communicating economic information to enable informed judgments and decisions by users.

Management Accounting

The branch of accounting that provides internal managers with information to improve decision-making, efficiency, and effectiveness.

Cost Accounting

A subsystem of accounting that measures, records, and reports information on product costs to aid control and planning.

Financial Accounting

The field that prepares standardized financial statements for external users, adhering to legal requirements and GAAP.

Scope of Management Accounting

Supplying information to internal users for resource allocation, operational efficiency, and strategic decision support.

Management Accountant

A professional who gathers, analyzes, and reports cost and operational data for planning, control, and performance evaluation.

Planning (Managerial Context)

Using accounting data to set goals, budgets, and resource allocations for future operations.

Control (Managerial Context)

Monitoring actual results against plans and taking corrective actions based on accounting information.

Performance Measurement

Assessing efficiency and effectiveness of operations through financial and non-financial metrics provided by management accounting.

Users of Accounting Information

Individuals or groups who rely on accounting data; external (investors, creditors) and internal (managers, employees).

Generally Accepted Accounting Principles (GAAP)

Authoritative standards governing financial accounting reports; not mandatory for internal managerial reports.

Internal Reporting

Customized, frequent accounting reports prepared for managers’ decision needs; future-oriented and detail-specific.

External Reporting

Annual or periodic financial statements issued to outside parties in compliance with statutory and GAAP requirements.

Product Costing

Determining the total cost of producing a good or service, used for pricing, profitability analysis, and inventory valuation.

Inventory Costing

Assigning production costs to goods held for sale, required for both financial statements and internal profit analysis.

Decision-Making Information

Relevant cost and revenue data supplied by management accounting to choose among strategic alternatives.

Statutory Requirement

A legal obligation—applies to financial accounting but not to management accounting reports.

Report Frequency

How often information is produced; managerial reports can be daily/weekly/monthly, while financial statements are typically annual.

Time Dimension

The orientation of accounting data; management accounting looks at past, present, and future, whereas financial accounting focuses on past results.

Segment Reporting

Focusing on parts or segments of a business (products, departments) rather than the organization as a whole, typical in management accounting.